From the global financial crisis of 2008 to the coronavirus pandemic led slowdown that could pull the world into a worse recession in 2020, Romesh Sobti has steered IndusInd Bank through some of the toughest times seen by the financial world. He finally hangs his boots today, after 12 roller-coaster years at the helm of the bank.
With almost four decades spent in banking, Sobti’s career spanned across public, private and multinational banks. The son of an army officer and an engineer by training, this banker has worn many hats since he started his career in the financial world at State Bank of India, took up roles at ABN AMRO, ANZ Grindlays Bank, and finally ended up at the Hinduja family-backed IndusInd Bank.
When Romesh Sobti took charge of IndusInd Bank in February 2008, the bank was in a bad shape. Although it hadn’t reported a loss in those first 15 years, its capital, quality of book, earnings were all severely impaired. Another mammoth problem for Sobti was the bank’s big asset-liability mismatch issue -- average liabilities of four months, and assets of four years. Investors didn’t want to touch the bank, customers were leaving too.
Romesh Sobti followed a brick-by-brick approach, plugged gaps, built a home loan portfolio, introduced customer friendly options like choice of denomination for withdrawals at its ATMs, and expanded the bank’s reach in rural areas.
“The basics were there to be fair but we had to recapitalise. That happened within three months of the management change. We had to reorganise the bank into client and product segments so that people had ownership of products and clients. Then, we had to restructure the balance sheet while we were the highest cost borrower and the lowest cost lender in the market. Therefore, you had the lowest net interest margins. So each item of the balance sheet was addressed.... you cannot have the best product and services if you don’t have good quality people. So, re-talenting the bank was our first point of arrival. Finally, re-infrastructuring the bank... it means technology, infrastructure, premises, processes, operations, compliance audit that you do,” Sobti recalled in a Network18 interview earlier.
Today, Sobti is known as the man who turned around IndusInd Bank. Under him, the bank remained one of the best-performing stocks in the Bankex Index for a decade after 2008 until the IL&FS crisis of 2018 when things started to go awry for the bank.
As Sobti retires from the bank, IndusInd Bank’s stock slumped over 30 percent, hitting an 8-year low of Rs 235.55 in trade, and its market capitalisation fell to below the Rs 20,000 crore mark. The share price has almost halved in less than a month.
The bank has been engulfed by fears of a further asset quality deterioration amid the shadow banking crisis triggered by IL&FS, the telecom sector woes with the Supreme Court ruling on Adjusted Gross Revenues and its exposure to the struggling real estate sector. While its gross bad loans at 2.18 percent as of the December FY 2019-2020 quarter are still far better than most peers, for the bank, the NPL ratio is close to the worst it has had in a decade.
Romesh Sobti’s efforts to calm investors and statements on the bank’s strong capital and financial position did little to soothe nerves in the current environment. The outbreak of the coronavirus pandemic has added a fresh set of fears of defaults from smaller businesses that are facing disruptions. Now, his time at the bank is up and his successor has to finish the job he started.
While Sobti's tenure at IndusInd Bank started and ended amid turbulent times, hopefully history will remember him for all that he did in between.
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